- During the trading session on Wednesday, we saw quite a bit of volatility in this pair with the US dollar plunging after the CPI came in cooler than anticipated, with a core CPI reading of 0.23% month over month instead of the expected 0.3%.
- However, the fundamentals in this pair have not changed. This is still a holding pattern between now and the Trump administration taking over in about five days. Then there is the question of what happens from that point on involving Mexico. Mexico has barked back a bit here and there about the terror threats. But quite frankly, I think we've got a situation where they will buckle. Otherwise, they will pay.
Mexico is Tied to America
The reality is that a huge chunk of the Mexican economy comes down to what they can ship to the US. Furthermore, you also have remittances from foreign nationals back into Mexico from the United States, who might be exiting the country soon. So, all of this could equal less demand for the Mexican peso. And even putting all of this aside, the Mexican economy is rather sluggish at the moment, while the US economy still runs very strong.
So, I think it makes sense that we continue to see this market try to go higher. The 21 Mexican peso level above is a major barrier. At this point, if we can break above that level, I think you have a real shot at the US dollar swallowing the Mexican peso, perhaps going as high as 25. Short-term pullbacks, I think, are still buying opportunities. Also, I see the uptrend line, the 50-day EMA, and the 20 Mexican peso level all as potential support levels. So, this is still more of the same. The fact that the US dollar bounced back the way it did in the forex world during the Wednesday session suggests that there are bigger things at play, and I think that this is definitely true in these emerging market currencies.
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